Market discovers life after China

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Resource stocks recover from fears of a big scaling back in demand for raw materials.

Base metals and gold propped up Australian indices yesterday as investors' concerns eased over policies in China to slow down growth.

And questions about possible interest-rate rises in the United States were answered, stoking markets to rise, when Federal Reserve chairman Alan Greenspan announced that US interest rates would remain at their 45-year low of 1 per cent.

Last week, China's Premier, Wen Jiabao, suggested inflationary pressures and shortages in coal, power and oil would force China to slow down its rapidly growing economy. Resource stocks took a heavy hit at the news, but yesterday began to recover.

"People realised that everything doesn't stop dead just because the Chinese Government says that it's going to try to slow down the economy," said Shaw Stockbroking's Lachlan Hughes.

Mr Hughes said that, despite the pressure associated with a possible rate rise in the US, the looming threat of a US rate increase was a "positive sign that the American economy is finally starting to tick".

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All major indices were up except Japan's Nikkei, which was closed for a holiday. In New York, the Dow Jones Index ended 3.2 points higher at 10317.20 and the Nasdaq rallied 11.76 points to 1950.48.

Back home, the All Ordinaries rallied 15.3 points to 3413.7 and the S&P/ASX 200 lifted 16.4 points to 3407.6.

Stock in BHP Billiton closed up 29¢ at $11.79 after the announcement of the approval of the $US192 million ($A263 million) Worsley Alumina Development Capital Projects in Australia. Professional services group Worley announced it had won the contract for engineering, procurement and construction management of BHP's Worsley project, lifting Worley stock 8¢ to $3.02.

St George Bank gave back some of yesterday's record gains early, but ended 4¢ stronger at $21.69. Westpac ended up 24¢ at $17.92, and Commonwealth Bank added 3¢ to close at $31.38.

But ANZ fell 12¢ to $18.33 and National Australia Bank dropped 15¢ to $29.25.

Among the telcos, Telstra rose 1¢ to $4.70 and Optus parent Singapore Telecommunications lost 3¢ to $1.96.

Wesfarmers rose after it announced chief executive Michael Chaney would be replaced by Richard Goyder when Mr Chaney retires in July 2005. But the stock receded quickly and ended down 32¢ at $27.74.

Queensland's Indigo Group, a diversified company with interests in property, hotels and technology, celebrated its ASX listing by oversubscribing its stock by 60 per cent. Expecting to sell $25 million in stock, the group ended the day netting $40 million. Queensland Investment Corp took an 8.5 per cent stake in the company.

Pharmaceuticals company Biota Holdings announced it would sue global group GlaxoSmithKline over the marketing of its flu drug, Relenza. Biota claims GSK abandoned promotion for the drug after the first year despite an agreement on an aggressive marketing strategy. Biota shed 3¢ to 67¢.